AUSTIN, Texas (AP) - With still more than two weeks to go in Texas' legislative session, Gov. Rick Perry said Wednesday it's too early to issue ultimatums to lawmakers.

Then he promptly issued one: Pass more tax cuts or work through the summer.

Perry threatened to call legislators back after the session ends May 27 if they don't approve a budget containing $1.8 billion in tax cuts and $2 billion for major water and infrastructure projects statewide.

"It's a little early to be drawing that line in the sand," he told reporters outside the state Capitol. "It should be no surprise that if folks want to go home at the end of this legislative session, send me $1.8 billion worth of tax relief."

"Send me a balanced budget that has no fee increases for transportation and $2 billion for infrastructure for water, and everyone can go home and enjoy their summer," Perry added.

He stopped short of saying he would veto a budget that passes both the Texas House and Senate without $1.8 billion in tax cuts - but not by much.

In his State of the State address in January, Perry called for $1.8 billion in "tax relief," saying a booming Texas economy means the state can afford it. He also urged spending $3.7 billion in water and road improvements that he suggested could come from the state's cash reserves, or Rainy Day Fund, which is projected to reach $12 billion if left untouched.

But his calls for tax cuts have largely fallen flat since, as Perry took a largely hands-off approach to the proposals advancing in the Legislature. In fact, Perry convened a more-recent news conference to call for a slightly more-modest $1.6 billion in cuts just to the business tax, and suggested that tapping the Rainy Day Fund might be necessary to pay for it.

His comments Wednesday, however, suggest he may be ready to increase the pressure as lawmakers enter crunch time.

The House late Tuesday night approved $667 million in tax cuts for state businesses - but only after some of the fiercest debate of what had been a relatively harmonious session. Democrats, who were ultimately outvoted by their GOP colleagues, argued the money should go to public schools which are still reeling from $5.4 billion in cuts lawmakers approved in 2011.

Perry said of the difficult vote, "they're a third of the way there." Asked if that will be enough, he replied, "$1.8 (billion) will be."

"It's unfortunate that he would say something like that," Watson said.

Sen. Kevin Eltife, a Tyler Republican who has been critical of the governor's approach to water and transportation issues this session, said those should take priority over tax cuts.

"When we're struggling to find $4 billion (per year) for roads and have to take money out of the Rainy Day Fund, I don't know how at the same time you pass a tax cut," Eltife said.

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PROTESTERS DEMAND MEDICAID EXPANSION AS HOPES FADE

Dozens of protesters marched through the Texas Capitol on Wednesday, demanding expansion of the Medicaid program, but Democrats said political pressure from the governor was preventing the Legislature from considering the measure.

Chanting, "We need health care, we can't wait," members of the Texas Organizing Project marched around the Capitol's rotunda holding photos of key lawmakers with the word "FAILED" stamped on them. The demonstrators protested outside Lt. Gov. David Dewhurst's office, singling him out for his vehement opposition to expanding Medicaid, a key provision of President Barack Obama's health care overhaul.

More than 24 percent of Texans do not have health insurance, the highest rate in the country. Texas Medicaid provides coverage to only a few childless adults so many poor adults depend on charity care provided in hospital emergency rooms. The high cost of those services is passed on through local taxes and included in private health insurance premiums.

Medicaid is a federal-state partnership, with two-thirds of the funding coming from Washington and a requirement to follow federal regulations. Supporters want to include up to 1.5 million new people in Medicaid to provide them with more consistent and affordable health care.

Texas could provide more than 1 million people with health care and better reimburse doctors if it spent $18 billion in state money over the next 10 years, earning $100 billion in federal matching funds.

But Gov. Rick Perry has called Medicaid a broken system and has asked federal authorities to give Texas the money with no strings attached, something known as a block grant.

"It would be irresponsible to add more Texans and dump more taxpayer dollars into an unsustainable system," said Lucy Nashed, Perry's spokeswoman.

A coalition of senior Republicans and Democrats had pushed for a bill that would outline the parameters under which Texas might accept Medicaid expansion, an important tool for the commissioner of health and human services to negotiate an agreement with federal authorities. But that compromise measure was left off the final slate of House bills up for debate on Thursday, effectively killing it.

The only hope to include those instructions now rests with a conference committee hammering out a final state budget. Conference committee members could add a non-binding rider in the bill calling for a block grant to cover the working poor included in an expansion of Medicaid while maintaining the current system for those already in the program. But Perry and conservative Republicans oppose any mention of Medicaid expansion in legislation this year.

"The governor, I believe, has had a chilling effect on support for health care expansion based on his requirement ... for a block grant," said Rep. Garnett Coleman, D-Houston. "We're still calling on the governor to take away his opposition."

Georgia McKnight was one of the protesters Wednesday, yelling, "Time is up, act now." She does not have health insurance, but she would be covered by expanded Medicaid.

"We're here to support the 1.5 million people in Texas that need health care expansion," she said. "I want to help a lot of working families."

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TOP SENATOR VOWS HIS CHARTER SCHOOL PLAN WILL PASS

The top proponent for school choice in the Texas Legislature vowed Wednesday that his much-watched effort to expand charter schools in Texas will become law - even though it could still face a tough road in the House.

Speaking to a midday charter school rally at the state Capitol featuring hundreds of activists, parents and teachers - some of whom brought their classes from Dallas, San Antonio and Austin - Sen. Dan Patrick cried, "I feel really good!"

"For the first time in almost 15 years, this Legislature is going to pass a bill addressing charter schools," Patrick said. "Raising the cap, allowing for more flexibility, innovation and an opportunity for those 100,000 parents who are on a waitlist."

Charter schools were first legalized in Texas in 1995 but the Legislature has not passed major legislation on them since 2001. Patrick, a tea party-backed Houston Republican, is sponsoring a bill that would gradually lift the current cap of 215 charters issued statewide, allowing it to increase to 305 over the next six years.

He originally wanted an unlimited number of charters, but had to scale back his proposal dramatically in order to win approval in the Texas Senate last month.

For now, Texas has issued 209 charters. Because operators can use a single charter to run multiple campuses, though, the state has 506 total charter schools educating 154,278 children, or around 3 percent of its 5 million-plus public school students.

Patrick and other advocates point to a survey conducted last summer by the Texas Charter School Association in claiming that nearly 102,000 more students across the state are waitlisted for charter schools that don't have the space to accommodate them.

The bill has yet to be heard in the House, however, and charter school legislation that passed the Senate died in the lower chamber during the last two legislative sessions in 2011 and 2009.

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TEXAS SENATE APPROVES TEACHER RETIREMENT CHANGES

A plan to boost the financial stability of the Texas Teacher Retirement System requires teachers and the state to pay more in to the fund, while also setting up a benefit increase for some longtime retirees.

Under a bill passed by the Senate on Wednesday and sent to the House, teachers will see their contributions to the $117 billion benefit fund rise from 6.4 percent in 2014 to 7.7 percent in 2017. The state will also increase its contribution from 6.4 percent to 6.8 percent.

And school districts that do not currently contribute to Social Security would start paying in at 1.5 percent.

The bill also would give a 3 percent benefit increase for teachers who have been retired for 15 years or more.

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SANTA APPROVES: HOUSE OK'S 'MERRY CHRISTMAS' BILL

On the brink of summer, defending Christmas is on the wish list of the Texas Legislature.

The House on Wednesday approved a bipartisan bill that aims to remove legal risks of saying "Merry Christmas" in Texas public schools. Traditional holiday symbols, such as a menorah or nativity scene, would also win a nod of state support so long as more than one religion and a secular symbol are also reflected.

State Rep. Dwayne Bohac says the bill seeks to protect schools from "ridiculous" lawsuits. Says the Houston Republican: "Teachers are fearful of calling a Christmas tree a Christmas tree."

Several Santa Claus impersonators were in the House gallery when the bill came up. They rang sleigh bells upon passage.

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HOUSE OKS SHIFTING CONTROL OF FRACKING WASTE WATER

Energy companies engaging in fracking and other oil and gas exploration would be excused from some possible litigation involving recycled waste water under a bill approved by the Texas House.

The measure has been cheered by oil and gas companies, who say it will encourage recycling water from fracking and other oilfield activities.

But opponents say it shifts ownership and liability from the waste water's producer to firms paid to recycle it.

They say that will make it harder to hold producers responsible for problems.

A Democratic effort to block the measure in the House using a parliamentary procedure failed Wednesday. Lawmakers then passed it with a voice vote.

The bill sponsored by Weatherford Republican Rep. Phil King must clear a final, procedural hurdle before heading to the Senate.

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TEXAS TROOPERS ARREST GAY RIGHTS PROTESTERS

Texas troopers have arrested five gay rights protesters after they blocked traffic in front of the state Capitol to demand equal rights.

The group Get Equal wants Texas to pass a law making it illegal to discriminate against someone for being gay or transsexual in the workplace. Under current Texas law, employers may fire someone based on their sexual orientation or deny them health benefits.

Democratic Sen. Leticia Van de Putte has introduced Senate Bill 237 to ban workplace discrimination, but conservative Republicans have blocked the measure. If the Senate does not take up the bill by Thursday, it will not be considered again this year.

Troopers arrested three protesters from the group when they occupied a lawmaker's offices last week.

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QUOTE OF THE DAY:

"I happen to love Austin in the summertime." - Sen. Kevin Eltife, R-Tyler, when hearing that Gov. Rick Perry had threatened to call a special session if the Legislature did not pass $1.8 billion in tax cuts.